2022 (1) TMI 1327

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..... t on delayed payment of TDS." 3. In this case, the Assessing Officer noted that on the perusal of details filed by the assessee, it is seen that assessee has claimed expenses of Rs.5,96,890/- on account of interest on TDS which is not an allowable expense under the provisions of the Income-tax Act, 1961 (for short 'the Act'). Therefore, he disallowed the same and added back to the income of the assessee. 4. Against this order, assessee went in appeal before the ld. CIT (A). Ld. CIT (A) noted the assessee's submissions in this regard as under :- "1. The assessee delayed in payment of TDS and deposited interest on late payment of TDS. 2. It is a matter of late depositing of creditors funds to the government and to compensate t .....

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..... ng to Rs. 5,96,890/ - in the case of the assessee. The Ld. CIT (A) has confirmed the addition citing Section 201 r.w.s 40 of the Income Tax Act, 1961 ('the Act"). The Ld. CIT (A) has not appreciated the true meaning and import of section 201 r.w.s. 40 of the Act. The disallowance of late deposit of interest is not governed by the provision of section 40 of the Income Tax Act. Section 40(a)(ii) of the Act disallows only the sums paid on account of any tax levied on the profits or gains of the business and profession or assessed on the basis of profits or gains. It may please be appreciated that the aforesaid disallowance in simple words is with regard to the non-allow ability of income tax paid/ payable by the assessee. In this reg .....

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..... wable. We wish to rely upon the following judgments wherein it has been held that the interest paid on delayed payment of service tax/IDS is compensatory in nature and is, therefore an allowable expenditure under Income Tax Act, 1961:- * Lachmandas Mathuradas v. CIT [2002] 122 Taxman 828 (SC)[at page no. 10] * Narayani Inspat (P) Ltd. (ITA No. 2127/Delj2014][at page no. 13] * STUP Consultants (P) Ltd. (ITA No.5827 /Mum/2012) [at page no. 25] * Sai Food Products (P) Ltd. (ITA No. 1887/Kol/2016] [at page no. 33] * IDS Next Business Solutions (P) Ltd. (ITA No. 510/Bang/2018] [at page no. 38] * Remfry & Sagar Consultants (P) Ltd. (ITA no. 5887/Del/2011) * Zoom Communication Ltd. (ITA No. 414/Del/2014) * Mahalaxmi Suga .....

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